Executive Briefings

Pharma Industry at a Crossroads in Healthcare Supply Chains

Analyst Insight: The pharmaceutical and bio-tech industry, as well as the medical device and medical product industries, are at a crossroads. This crossroads consists of industry identity and business channel markets determination - each of which will drive every company's future in the domestic and international marketplace as a single sector leader or multimarket healthcare provider for the coming decade. - Brian Hudock, Partner, Tompkins International

There are some clear paths for 2013 and beyond. Most of them revolve around security, including global track-and-trace compliance for finished goods, but soon they will expand all the way back to API manufacturing and consist of all supply chain partners. Anyone not addressing global track-and-trace compliance standards will experience an expensive game of catch-up in 2013.

Not a whole lot is clear for industry supply chain planners after security. Trying to define future markets that provide sourcing opportunities as well as profitable business margins and patent protections is as daunting as balancing the market focus of the organization across single or multiple healthcare segments.

Marketplace Decisions

Asia: The Chinese market growth across the board has dipped below double digits and will likely not accelerate anytime soon. But huge investments in manufacturing capacity and development continue in anticipation of the world's largest customer base reaching maturity. Complex business rules and the changing Chinese government interference in the free market do not appear to be stabilizing anytime soon. This needs to be settled before it severely affects foreign investments.

"¢ Europe: The Europe marketplace is currently driven by government price controls and often favors internal country players. The challenge is each country has taken a slightly different path. How to best leverage margin versus volume on sales has become a much more complex equation dependent upon very sophisticated sales and operations planning tools. In addition, internal supply chains in Europe are driven by logistics service partners as much as by sourcing partners.

"¢ North America: With the last hurdle of the Affordable Care Act overcome, government mandate healthcare for all is a reality. What that means for price controls, Medicare reimbursements, drug approvals, and healthcare consumption is still to be seen. But 65 million more eligible citizens in the highest-margin pharmaceutical marketplace will impact demand, drive volume to generics and lower-cost options when available.

Healthcare Provider Strategy

Which is better: To provide a single product line backed by a focused organization, or a broad portfolio maximizing the healthcare market needs and potentially minimizing market segment uncertainty?

In 2012, both strategies and multiple variants of each were seen as some companies divided to improve performance and profitability by division. Others continued to diversify and look for ways to maximize their footprint across the healthcare marketplace. Each strategy appears sound for those pursuing them, based upon their market position. This trend will likely continue, so the ability to merge and split supply chains will be critical. Having integrated business units provides the lowest-cost supply chain if they can be integrated. If not, the risk of building multi-division supply chains creates excess inefficiencies.

The Outlook

For pharmaceutical and healthcare companies in 2013, supply chain planning and strategy will shift daily. The ability to react quickly, leverage internal and external partners, overcome specific global regional challenges, and be in full compliance with global security standards will be the responsibility of the supply chain team.


Keywords: supply chain management, value chain, healthcare supply chain, pharmaceutical supply chain, pharmaceutical logistics management

There are some clear paths for 2013 and beyond. Most of them revolve around security, including global track-and-trace compliance for finished goods, but soon they will expand all the way back to API manufacturing and consist of all supply chain partners. Anyone not addressing global track-and-trace compliance standards will experience an expensive game of catch-up in 2013.

Not a whole lot is clear for industry supply chain planners after security. Trying to define future markets that provide sourcing opportunities as well as profitable business margins and patent protections is as daunting as balancing the market focus of the organization across single or multiple healthcare segments.

Marketplace Decisions

Asia: The Chinese market growth across the board has dipped below double digits and will likely not accelerate anytime soon. But huge investments in manufacturing capacity and development continue in anticipation of the world's largest customer base reaching maturity. Complex business rules and the changing Chinese government interference in the free market do not appear to be stabilizing anytime soon. This needs to be settled before it severely affects foreign investments.

"¢ Europe: The Europe marketplace is currently driven by government price controls and often favors internal country players. The challenge is each country has taken a slightly different path. How to best leverage margin versus volume on sales has become a much more complex equation dependent upon very sophisticated sales and operations planning tools. In addition, internal supply chains in Europe are driven by logistics service partners as much as by sourcing partners.

"¢ North America: With the last hurdle of the Affordable Care Act overcome, government mandate healthcare for all is a reality. What that means for price controls, Medicare reimbursements, drug approvals, and healthcare consumption is still to be seen. But 65 million more eligible citizens in the highest-margin pharmaceutical marketplace will impact demand, drive volume to generics and lower-cost options when available.

Healthcare Provider Strategy

Which is better: To provide a single product line backed by a focused organization, or a broad portfolio maximizing the healthcare market needs and potentially minimizing market segment uncertainty?

In 2012, both strategies and multiple variants of each were seen as some companies divided to improve performance and profitability by division. Others continued to diversify and look for ways to maximize their footprint across the healthcare marketplace. Each strategy appears sound for those pursuing them, based upon their market position. This trend will likely continue, so the ability to merge and split supply chains will be critical. Having integrated business units provides the lowest-cost supply chain if they can be integrated. If not, the risk of building multi-division supply chains creates excess inefficiencies.

The Outlook

For pharmaceutical and healthcare companies in 2013, supply chain planning and strategy will shift daily. The ability to react quickly, leverage internal and external partners, overcome specific global regional challenges, and be in full compliance with global security standards will be the responsibility of the supply chain team.


Keywords: supply chain management, value chain, healthcare supply chain, pharmaceutical supply chain, pharmaceutical logistics management